Iranians changing money for gold ahead of US sanctions

Gold prices in Iran are hitting record levels daily as Iranians seek to protect their savings against pending US sanctions that are dragging down the national currency.

The White House is on the verge of reinstating sanctions against the Islamic Republic that were lifted following the historic nuclear deal sealed between Tehran and world powers in 2015. President Donald Trump unilaterally withdrew the US from the agreement on May 8.

The first round of renewed US sanctions will take effect on Tuesday with the harshest penalties expected in early November. The US will impose a ban on the country’s automotive sector and metals trading, while further sanctions will target oil and shipping industries.

The imminent ban has tripled year-on-year demand for the precious metal, including bars and coins, to about 15 metric tons, according to the latest report by the World Gold Council. To meet the surging demand Iran's central bank had to mint hundreds of thousands of coins, reportedly totaling over 60 tons of gold.

The price for a 8.13-gram gold coin reportedly hit 36 million rials ($820) on Sunday, more than double its price in January. Last week, gold set a record of 45 million rials ($1,025) per coin.

“People are changing their money into gold because it’s a reliable investment commodity,” Mohammad Kashtiaray, the head of gold and jewelry committee under Iran’s Chamber of Guilds told the Wall Street Journal.

Iran’s national currency, the rial, has faced a record plunge in 2018. The rial is currently hovering around 44,000 per US dollar against 36,099 in January, according to XE Currency Converter. The country’s GDP is expected to continue shrinking next year with inflation and unemployment currently seeing a double-digit increase.